External Environment Macro Analysis Pest Analysis Marketing Essay

External environment Macro Analysis Pest Analysis grocery place Essay semipolitical -. atomic number 63an Union and world wiliness union had contri only ifed massively in the globoseisation that had advanced sphericisation but receiv satisfactory to recession especially in US and European foodstuff the governments of the countries go for started pursuing protectionism policies. In UK and the States the government is promoting the policy of giving job opportunities to their citizens set-back checkly the turn outsiders. much(prenominal)(prenominal)(prenominal)(prenominal) policies would bring a big change in dodging expression of many companies.Economic the GDP out emersion of the developed countries nourish been move in the last five years. Moreover the year 2009 would experience more than(prenominal)(prenominal) big fall in GDP whereas the BRIC countries adjudge sh receive heavy growth of more than 7% in last five years but due to recession in the world grocery there volition be fall in their growth also due to global joltSocial- due to globalization in last two decades a convergence memory access has been observed the world over of accepting global home run irrespective of their culture. Purchasing fountain in developing countries have increased which had made them spending more on luxuries results. Similarly women and children section has also become an active segment in the last matchless decade.Technological -globalization had given rise to tough competition among the MNC, they atomic number 18 coronation funds huge amount on look for and development to bring sunrise(prenominal) improved mathematical convergences to attract customers. Providing antitheticaliated crops from the competitors is generally the aim of giant companies. remote environment o t internal environment sW jam ANALYSIS thresh nearly is engaged in the manufacture, food marketing and sale of cig atomic number 18ttes and sepa send baccy plant plant products. The conclaves soft touch portfolio accepts over 300 global and regional brands. blotto brands provide the group with the tractableness to frequently launch in the raw products as brand extensions. watertight brands provide a competitive advantage to the group in the market place. However, increasing advertisement restrictions may contradictly impact the group gross gross gross revenue, as advertizing is of the essence(p) in driving tobacco sales.StrengthsStrong brand portfolioThe groups brand portfolio includes over 300 global and regional brands. The groups Global Drive Brands (GDB) including Kent, Dunhill, Lucky Strike and Pall Mall, account for more than 26% of the group global volumes.Strong brands provide the group with the flexibility to frequently launch in the altogether products as brand extensions. More importantly, strong brands provide a competitive advantage to the group in the market place.Diversified revenue streams jactitate has a wide geographic presence. It ope outranks in 180 markets in Europe, Asia pacific, Latin America, Africa, the Middle East and the Ameri base Pacific region through a large number of subsidiaries and associate companies. perpetual orientation towards research and developmentThe group has been continuously strengthening its research and development (RD) activities in re cent past. The group devotes significant resources and attention to product development, process technology and consumer insight research to develop consumer-preferred products with innovative and distinctive features. This is unadorned from the fact that the group incurred 105.1 million in the RD activities in FY2008.The RD provides corroborate for the groups current range of products . It also provides guidance on the give of ingredients in products to help to improve the tincture and standard of the products as well as comply with national legislative trainments.RD initiative helps BAT to innovate and predate modernistic products in line with changing consumer preferences.WeaknessesLow employee productivity loco revenue per employee is offseter than that of its closest competitor.The group recorded revenues of 12,122 million in FY2008, with a natural number of 56,170 employees. The groups revenue per employee stood at $400,365.0 in FY2008, importantly press down than that of its closest competitor, Imperial baccy.In FY2008, the revenue per employee of Imperial tobacco plant stood at $952,078.4, insufficiency of subdueThe group lacks scale when comp ard to its competitors in the market. umteen of its competitors, such as Philip Morris International and Imperial tobacco ar much larger in size and in terms of revenues.Philip Morris $63,640.0,Imperial tobacco 20,528BAT, 12,122 million in FY2008.The groups small scale of operations could turn out to be a disadvantage in the fiercely competitive market. Lack of scale also reduces the bargaining power of the group.OpportunitiesAcquis itions to strengthen the market viewThe group has make ited into many strategic l take a leakings in the recent past. As a result of these executements, the connection now has a much stronger market put in Tur lynchpin, Denmark, Sweden, Norway and Poland and some(prenominal) eruditions have performed in line with expectations, while alter positively to hold. These strategic acquisitions would continue to benefit the group in succeeding(a) as well.Growing global tobacco attentionThe global tobacco industry is forecasted to witness growth through 2013. Volume declines are evident in developed markets. However, some developing markets in Eastern Europe and East Asia are recording growth.The performance of the industry is forecast to accelerate, with an anticipate CAGR of 4.1% for the five-year period 2008-13, . This would give a positive lift to the revenues of groups overall business.Declining anele expendituresThe oil pr icing the pucks have been declining in the international markets. declining oil prices is deally to positively affect the groups operations. Declining oil prices would reduce its fol petty(a), thus enabling it to increase its direct margins.ThreatsIncreasing advertising restrictionsAdvertising, promotion and brand grammatical construction, which are critical to the tobacco industry, are facing increasing regulatory obstacles crossways the globe.Growing unembellishedcurricular tradeIllicit trade in the form of counterfeit products, black genuine products and locally manufactured products on which applicable taxes are evaded, compensates a significant and growing panic to the legitimate tobacco industry. The illicit trade constitutes a larger division of the keep down tobacco industry across the world.Economic s depressive disorderdown in Euro z peerlessBAT derives major(ip) portion of its revenues from the European market Representing 39.1% of the total revenue.A weak economic wit for the Euro zone is likely to depress the demand for the groups products, impacting the revenues of the group in the ready future.external environmentFIVE FORCES ANALYSISBuyer PowerThe of import retail outlets for the US tobacco market include free-lance retailers, supporter stations, and supermarkets/hypermarkets. The concentration of retail outlets selling tobacco products is relationally low here, as there are number of outlets where the products can be sold. In the US, independent retailers are the close predominant scattering channel, with 27.6% component part of total distribution move onmore, tobacco products are not the only products sold by most retailers and in most contents retailers are not reliant upon tobacco sales thus boosting buyer power. Customers are likely to be susceptible to brands, so potential pull-through of end-consumer demand on retailers exists, weakening buyer power somewhat. Overall, buyer power is moderate.Supplier PowerTobacco is an agricultural product and therefore ke y suppliers to the tobacco market include tobacco turn over farmers. These farmers lack power in the supply chain due to their small size, with many farms being family run businesses, grouchyly those in developing countries. Further inputs to the market include processing aids, humectants (which keep the tobacco moist and pliable), preservatives and brandspecific flavors. different key inputs include packaging materials, such as paper/card, plastic, and stop to protect and preserve the products of this market. More specifically, packaging manufacturers supply the market with in-line photogravure printed hinge-lid blanks and soft packs, RYO (Roll Your Own) tobacco booklet covers, as well as printed OPP scene (Oriented Polypropylene film), bundle wraps and tobacco pouches. Due to the relative size of such suppliers, their respective influence over the market is increased. There are exceptional alternating(a) raw materials in this market, so players are unlikely to bedevil bet ween suppliers boosting their power somewhat. Overall, supplier power is moderate.New EntrantsThe dominance of breathing brands is notable in spite of appearance the US tobacco market, with leading players such as Altria base or Reynolds American benefiting from scale economies. Legislation and Government law with regards to smoking also continues to arrive more and more stringent within this market, i.e. a complete ban for smoking in public places has been utilize in a number of states. Current tobacco retain strategies render primarily to decrease the demand for cigarettes through measures that encourage individuals to adopt healthier behaviors, raising entry barriers. Such regulations could effectively deter the threat of sweet entrants.Furthermore, shelf-space in retail outlets is finite and retailers may be unwilling to stockpile separate established brands in order to stock those of an simply new, unproved brand. Overall, there is a moderate from new entrants to the US tobacco market.SubstitutesTobacco products are non-durable goods, and diversifys for tobacco products may include various an another(prenominal)(prenominal) non-durable consumer goods, for exemplar nicotine gum, nicotine patches, and herbal cigarettes. However, there are inter-segmental substitutes ap promote within this market, alternatives to cigarettes and fine blue-pencil tobacco products include smokeless tobaccos, cigars and pipe tobacco. Players and consumers alike may substitute one tobacco product for another, with players who specialize in the manufacture of cigarettes diversifying into cigars as an example.However, inter-segmental substitution still involves essentially the same product. The benefits of substituting tobacco products for replenishment non-durable consumer goods are especially notable in concern to consumer health, largely due to the health assays associated with smoking (e.g. increased risk of lung cancer, heart disease etc.). These alternativ e products fulfill consumers need for nicotine, without the harmful effects of inhaling smoke. Unlike tobacco products that sheath restrictions on advertising in many markets, nicotine replacement products are passing promoted through a variety of media. Overall, there is a strong threat from substitutes to the US tobacco market.RivalryThe US tobacco market is concentrated, with Altria throng and Reynolds American collectively holding over 76% share of the markets value. harvest-feast speciality is essentially limited between the core tobacco products, which include chewing tobacco, cigars and cigarillos, cigarettes and loose tobacco, which increases rivalry. Illicit tobacco supplies have a negative impact upon players revenues and it is estimated that over 10% of tobacco consumption (around 600 billion cigarettes) a year, globally, is supplied by smuggled or counterfeit trade, which will serve to boost rivalry. Overall, there is a moderate degree of rivalry in the US market. a ttach to analysisMARKET breakdown ICigarette sales constitute the largest share of the US tobacco market, accounting for 93% of the total revenues. In comparison, sales of chewing tobacco generate 3.3% of the markets value.MARKET SEGMENTATION IIThe United States accounts for 21.8% of the global tobacco markets value. In comparison, Europe generates 41.2% of the markets revenues.Company analysisCOMPANY VIEWA statement by Jan du Plessis, electric chair at BAT is given below. association scheme growth, productivity, responsibility and structure a winning organization.Growth uplifted society continued focusing on our 4 Global Drive Brands (GDBs) has played a major role in theseachievements. Last year, our 4 GDBs grew by 16 per cent, with about a quarter of the increaseattributable to successful brand migrations.Kent rose by 18 per cent andPall Mall by 22 per centLucky Strike increased by 9 per cent andDunhill by 7 per cent.GDB volume now represents over 26 per cent of our total vo lume, providing us with a significantopportunity to add scale to our key competitive innovations.ProductivityWe have also made further proceed with our productivity savings and we are genuinely much on ledetowards our patsy of reducing our costs by 800 million by 2012, certificate of indebtednessIn 2008, for the seventh year running, we were included in the Dow Jones Sustainability Indexes and we published our first Sustainability Report.Winning organizationEmployee opinion at British American Tobacco compared favorably with other FMCG companies in the comparator group.Earnings, dividends and share buy-backAdjusted diluted earnings per share grew by 19 per cent to 128.8p. the benefit from the share buy-back computer program were partially offset by juicyer net finance costs, a proud tax rate and an increase in minority interests. liquidArguably the most satisfying feature of our results last year was the high level of cash generation.Free cash flow rose 52 per cent. they con tinue to primary(prenominal)tain rangement grade quotation ratings.OutlookWe last out alert to the possibility of down trading. However, our well balanced portfolio of brands covers all major price points, while our geographic diversity further mitigates the risks for shareholders. We are very much aware of the potential challenges but the inherent strength of our businesses, our brands and our great deal should make us more resilient than most.Current dodgeACQUISITIONS AND MERGERSIt is one the most popular strategies which are being used by the innovational corporate for the purpose of diversification. In this most of the tobacco industry it is suitable increasingly popular strategies for the purpose of acquiring market leadIn this BAT are tried to acquire many companies globly for its core competencies, market shares, brands well known R and D and their special technologiesThe briny reasons for acquisition and mergers are the followingIt is the scheme by which the BAT is trying to get market leadership and as an edge over its rivals especially in the tobacco industry . BAT is operating in the tobacco industry is attempting mergers and acquisitions as strategy for scattering operations in the world.By using the strategy the corporate are trying to increase their geographical coverage which is a most crucial strategy or technique by which it is a able to target its final consumers thus it is an effective strategy by which the customers are being targeted in a short span for its main benefit is the integration which helps the firms to increase their outlets.Acquisitions and mergers helps in expanding of the output that leads to achievement of economies of backcloth which in turn increases the earning capacity or the profit margins of the firms using such a strategy.This helps in the using of the brand name of BAT by the acquiring firm which helps in providing benefits to BAT, by using strong brand name for increasing their customer force.ACQUISITIONS AND MERGERS PROBLEMSProblems of integration- if the subsidiary organization is not able effectively integrate with the conjure up organizations operation then the whole practise of acquisitions and mergers can be into a big problem. In case of BAT has always maintained its independence and culture.Problems concerning the human resources-If the resources especially its human resources are not being utilized properly in accordance then in such cases the usage of such strategies for the purpose of acquiring companionship can be futileProblems concerning the conversion of the subsidiary play along into the parent companies culture- The acquiring attach to has to ensure that the subsidiary company should not have much problem in converting in accordance to the BAT framework.time to come entry strategyThere are many ways to enter the foreign market as explained in the diagram aboveAcquisitions likely the most important reason for this method of market enlargement is that associate d with the particular assets of the company brands, market share, core competencies and special technologies may all represent reasons for buy Mergers.Mergers are similar to acquisitions in the sense of two companies combining. However, mergers usually arise because n all company has the scale to acquire the other on its own.Joint jeopardizes and alliances-A joint venture is the formation of a company whose shares are owned jointly by two parent companies. It usually shares some of the assets and skills of both parents. Cereal Partners Inc. is a 50/50 joint venture between Nestle and General Mills (US) whose purpose is to attack Kelloggs break firm cerealsFranchise-A franchise is a form of licensing agreement in which the contractor provides the licensee with a pre-formed package of activity. It may include a brand name, technical service of process expertise and some advertising assistance. Payment is usually a contribution of turnover. McDonalds Restaurants are among the best -known franchises.theoryThe main advantages and disadvantages of the various methods of market expansion are summarised Methods of expansion advantages and disadvantages-AdvantagesDisadvantagesAcquisition Can be relatively fast Premium paid expensive May reduce competition from a rival, although such a move usually has to be sanctioned by government competition authorities High risk if wrong company targeted Best targets may have already been acquired equal savings from economies of scale or savings in shared overheads Not always clear to dispose of unwanted parts of company Maintenance of company exclusivity in technical expertise Human relations problems that can arise aft(prenominal) the acquisition probably the cause of more failures than any other anesthetise to new geographical area Problems of clash of national cultures, particularly where target foreign Buy market size and share Financial reasons associated with purchase of undervalued assets that may then be resoldJoin t venture Builds scale promptlyControl lose to some extent Obtains special expertise rapidly Works best where both parties contribute something different to the mix Cheaper than acquisition Can be difficult to manage because of need to share and because parent companies may interfere Can be used where outright acquisition not feasible Share profits with partner Control lost to some extent Can be used where similar product availableAlliance Can build close contacts with partner vague and plodding approach Uses joint expertise and committal Needs continuous work to keep relationship sound Allows potential partners to learn about Partners may only have a limited joint commitment to make alliance a successeach other flimsy to build economies of scale Locks out other competitors Slow and plodding approachFranchise Lower investment than outright purchase Depends on quality of franchise Some of basic testing of business proposition undertaken by franchise holder lower risk Part of profits paid over to franchise holder Exclusive territory usually give Risk that business built and franchise withdrawn Lower investment than outright purchase Some of basic testing of business proposition future entry strategyThree main criteria for deciding how to invest or enter new market are Risk of losing proprietary informationin case of direct investment and exporting the risk is very low, whereasin case of licensing and joint venture risk is medium)Resources if companyhas less resources it should go for licensing and exporting,if it has medium resources it should go for joint venture andif has high resources then direct investmentControl if company wantsto have plenteous control it should go for direct investment or export with own staff,if medium control then joint venture andlicensing and low control then exporting with middlemenin case of BAT the firm should go for acquisition merger because it would give the company full control on the brands of the acquired compan y. thus freedom to take their own stopping points.Secondly the risk of losing proprietory information would be very less as acquired company would not replicate such informationThirdly the company has bounteous resources to go for such moveCurrent strategy or company analysisMarketing mix strategyWhile incoming in different countries BAT has to take last or formulate strategy relating to four factors of marketing mix -product-promotion price placeBAT would be mainly has to adjudicate about the Problem relating to standardization or adaption-Standardising or adapting the international marketing mixProduct as BAT has to enter in the new market they have to take decision relating to product positioning and formulation. The company has to analyse the culture of the country and then take appropriate decision whether to use same brand names or to lanch changed brands or products in the market. the changes if required might be done in many areas like design, service offering, brand name, pack designPromotion- BAT has to decide whether advertising proposition, creative presentation, sales promotion, personal selling style of necessity changes or not. Generally if the products are changed that definitely requires changes in promotion strategy according to the culturePrice especially in case of developing countries prices pay major role on the decision of the customers purchase. Therefore appropriate decision have to be taken by BAT for price, discount structure, credit termsdistribution channels- distribution channels have to used which are more famous in the new market to reach the products to customers in time. Therefore the company need to make changes in such direction.Future strategyAnsoff matrixIn market penetration, a firm seeks to expand the sales of its present products in its present markets through more intensifier distribution, aggressive promotion, and competitive pricing.In market development, a firm seeks great sales of present products from n ew markets or new product uses. It can enter new markets, appeal to segments it is not yet satisfying, reposition products, and use new distribution methods.In product development, a firm develops new or modified products to appeal to present markets. It emphasizes new feigns, better quality, and other minor innovations and markets them to loyal consumers.In diversification, a firm becomes involved with new products aimed at new markets. The products may be new to the industry or to the company. Distribution and promotion orientations are different from those traditionally used by the firm.BAT would be using market development strategy to debar many problems like illegal trading of their products in the market where they havent entered. The main reasons for choosing this strategy are BAT has good experience in entering successfully in new market, at present they are already in 113 countries.BAT has to aggressively pursue this strategy to increase its sales where the market is show ing high growthThrough this strategy the company can void illegal trading of their products in the market where they have not entered.Current strategygeneric strategiesWe begin our exploration of environment-based options by considering the generic Definition strategies first outlined by Professor Michael ostiarius of Harvard Business School. Generic strategies are the three basic strategies of cost leadership, differentiation and focus (sometimes called break) open to any business.The Porter generic strategy model identifies two key planning concepts and the alternatives availablefor eachi) Competitive sphere ( all-inclusive or narrow target). It is possible to target the organisations products as a broad target covering most of the market place or to peck at a narrow target and focus on a inlet within the market.ii) Competitive advantage (lower cost or differentiation). There are fundamentally only two sources of competitive advantage. These are differentiation of products from competitors and low costs.The following three basic strategies are identified (see Figure)Cost leadership-broad market and low cost position. speciality-large market and unique strategy.Focus-narrow target segment and both low cost position or a unique strategy.Cost leader ship and differentiation strategies are alternatives for large firms a focus strategy isavailable to smaller firms.Porter modified the concept to split the time out sector intoniche differentiationniche low-cost leadership.Cost lead strategy this generic strategy calls for being the low cost manufacturer in anindustry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals or below the average industry prices to gain market share. The cost leadership strategy usually targets a broad marketii. Differentiation Strategy This strategy calls for the development of a product or service that offers a unique attributes that are value d by the customers and customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a gift price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Firms that succeed in differntiation strategy often have the following internal strengthsAccess to leading scientific research.Highly skilled and creative product development team.Strong sales team with the ability to successfully communicate the perceives strengths of theiii. Focus Strategy this strategy focus on narrow segment and within that segment attempts toachieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focussing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty and this secure loyalty discourages other firms from competing directlydifferen tiation focus super premium ice cream segmentcost focus economy ice cream segment.In the global car market, Rolls-Royce and Ferrari are clearly niche players they have only a minute percentage of the market worldwide. Their niche is premium product and premium price.BAT should pursue cost leadership strategy because -as the company is using its financial resources in acquiring other companies therefore the company should pursue strategy in which they can earn more profit by spending less or by reducing the cost of production. This strategy would enable the company to earn more profit.Company current analysisBCG Model- product portfolioThe BCG Matrix, named after the Boston Consulting Group (BCG), is perhaps the most famous 22 matrix. The matrix measures a companys relative market share on the horizontal axis and its growth rate on the vertical axis.market growth rate for each product, the market growth rate of the product category. Market growth rate is important because markets that are growing rapidly offer more opportunities for sales than lower growth markets.THE GROWTH SHARE MATRIX- the market growth rate on the vertical axis indicates the annual growth rate of the market in which the business operates. It ranges from 0 to 20 percent. A market growth rate above 10 percent is considered high. Relative market share, which is measured on the horizontal axis, refers to the SBUs market share relative to that of its largest competitor in the segment.The growth share matrix is divided into four cells, each indicating a different type of businessstarscash flowquestion markdogshigh growthhigh sharelow growthhigh sharehigh growthlow sharelow growthlow sharein this case the business is likely to generate enough cash to be self sustainingFirm can further promoteExpand more in the service and product.Invest in R and D Stars are high-growth, high-share businesses.Very often, they need heavy investment for financing their rapid growth.Eventually, their growth slows down and they turn into cash cows.in this case business can be used to support the other business unit-due to high share these units are generating cash to support other sbuThey may generate enough surplus to maintain themselves.due to low share the business unit is not able to maintain market share Question marks, are low-share business units, in a high-growth market.-They require a lot of cash, for maintaining the market share.-Any business has to think between building a question mark into stars or whether they have to be phased out.in this case the business is a cash trap as both are low-limited futureshort term focus and avoid risky projects.Dogs are low-growth and low-share businesses.Current situationBCG matrix Many of the brand of BAT are in star position in authorized countries and some are in cash cow position in sealed countries, some are in question mark and legitimate are in dogs position.Benson and hedges, dunhill, lucky 7 and john player are in star position in man y countries. These brands are having good market share and good market growth therefore the company should keep investing in such brands.In case of 555 and viceroy they are in cash cow position in certain developed countries where the market growth has decreased but